Energy officials from the world's top consumer nations sought ways to tame record prices today, a day after oil's biggest one-day surge ever, as the US Energy Secretary singled out cheap Asian fuel as part of the problem.
A two-day meeting of Group of Eight energy ministers plus officials from China, India and South Korea comes amid unprecedented volatility in the oil market and growing public discontent over their governments' failure to soften the blow, which is adding more pain to an already ailing world economy.
US Energy Secretary Sam Bodman today urged countries to scrap fuel price subsidies that inflate demand, a shot across the bow for China and India, whose fast-growing consumption and cheap prices have helped drive oil's explosive six-year rally.
"We know demand is increasing because a lot of nations are still subsidizing oil, which ought to stop," Mr Bodman said, just before meeting with top officials from Japan, plus non-G8 South Korea, China and India, nations that consume half the world's oil.
India followed Taiwan, Indonesia and Sri Lanka in raising domestic fuel prices this week with only its second increase in two years, but analysts said the 10 per cent hike was unlikely to have an impact unless rates were allowed to rise faster.
China, the world's second-largest oil consumer, has raised pump rates only once since mid-2006 due to inflation worries, increasing them by 10 per cent in November, cushioning consumers from the near doubling in world prices since then.
The issue of tempering demand took on new urgency on Friday, as oil prices rocketed by more than $10 to a new high above $139 a barrel, taking this year's gains to 44 per cent.
But India's ambassador said it was not realistic to abandon controls that help protect its 1.1 billion people.
"We as a developing nation are not in a position to completely do away with ... subsidies," said Hemant Krishnan Singh, who is standing in for the oil minister at the meetings.